Author: openjargon

S&P/ASX 200 Index (ASX: XJO) energy shares are sinking for the second consecutive day today.

In late morning trade the ASX 200 is up 0.2%.

But ASX 200 energy shares aren’t helping out with the lifting. Here’s how the big three oil and gas stocks are tracking at this same time:

• Woodside Energy Group Ltd (ASX: WDS) shares are down 0.9%
• Santos Ltd (ASX: STO) shares are down 0.9%
• Beach Energy Ltd (ASX: BPT) shares are down 1.8%

Investors look to be favouring their sell buttons here following another overnight retrace in the oil price.

Here’s what’s happening.

Why is the oil price slipping?

International benchmark Brent crude oil dipped another 0.1% overnight to US$77.47. That brings the weekly Brent crude oil price decline to almost 8%, with the oil price down more than 15% since 5 April, when that same barrel was fetching US$91.17.

West Texas Intermediate crude oil also declined 0.2% overnight to US$73.12 per barrel.

The oil price and ASX 200 energy shares continue to be pressured on the heels of this weekend’s Organization of the Petroleum Exporting Countries and its allies (OPEC+) meeting.

While the cartel agreed to extend its existing production cuts through the coming quarter, it surprised the markets by saying production would begin to lift in October, with cuts phased out by June 2025.

This is likely to see OPEC produce an additional half a million barrels per day by the end of 2024, with production expected to increase by 1.8 million barrels per day by next June.

In what would prove good news for ASX 200 energy shares like Woodside, OPEC has a rather bullish outlook for global energy demand, forecasting that this demand growth will keep prices in balance amid the additional supply.

Headwinds brewing for ASX 200 energy shares?

Many analysts believe that OPEC’s growth forecasts are overly optimistic.

That would mean the extra supplies coming to market could keep a lid on the oil price and the profit margins for ASX 200 energy shares.

According to Robert Rennie, head of commodity and carbon strategy at Westpac Banking Corp (ASX: WBC), quoted by The Australian Financial Review:

With global inventory rising, fuel inventory surging and more supply coming onstream through the fourth quarter, it’s hard not to see a push-back into the US$75 to US$80 range that contained us for much of the first quarter this year.

Rennie is talking about Brent prices here.

Fundstrat Global technical analyst Mark Newton has an even more bearish take, expecting the oil price to fall further from here.

According to Newton:

WTI crude could very well revisit last December’s lows in the high US$60’s, as a minimum downside target, and should make energy a difficult sector to overweight in the short run.

It seems that traders viewed the lack of an output cut extension through year-end as bearish.

While that would likely throw up some shorter-term headwinds for ASX 200 energy shares, this could provide an opportune longer-term entry point in this highly cyclical market.

The post Are headwinds brewing for ASX 200 energy shares? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Why is the Woodside share price tumbling on Tuesday?
• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 on Monday
• Here’s the average wealth of Aussies who manage their own superannuation

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

There’s no denying the impact of artificial intelligence (AI) on the tech world since early last year, and Nvidia (NASDAQ: NVDA) has been among the primary beneficiaries. The company’s graphics processing units (GPUs) supply the computational horsepower that underpins AI, pushing the stock to greater heights, resulting in a high-profile stock split.

In a keynote address this past weekend ahead of the Computex trade show in Taiwan, CEO Jensen Huang laid out Nvidia’s game plan for the next couple of years, which made one Wall Street analyst even more bullish.

You can’t spell gains without AI

Bank of America analyst Vivek Arya called Nvidia a “top pick,” reiterating his buy rating on the stock and raising his price target to $1,500. That represents potential gains for investors of 37% over the coming year compared to the stock’s closing price on Friday.

“Our company has a one-year rhythm,” Huang said. “Our basic philosophy is very simple: Build the entire data center scale, disaggregate and sell to you parts on a one-year rhythm, and push everything to technology limits.”

The analyst noted that with this statement, Nvidia is essentially accelerating its product upgrade cycle from two years to one year. This will “continue to bolster Nvidia’s AI leadership position,” according to Arya.

The evidence suggests the analyst is on to something. During his keynote, Huang said Nvidia planned to unveil a Blackwell Ultra processor in 2025, with its next-generation Rubin platform slated for release in 2026. The first Blackwell processors are slated for delivery beginning later this year, replacing the wildly popular Hopper generative AI chips.

This relentless pace of innovation keeps Nvidia ahead of the competition. In its fiscal 2024 (ended Jan. 28), the company spent nearly $8.68 billion — more than 14% of its total revenue — on research and development. This has helped Nvidia maintain its sizable technological lead on its rivals, which shouldn’t be changing anytime soon.

Nvidia stock is selling for 42 times forward earnings, a premium that’s supported its triple-digit revenue growth, making the stock a buy. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is Nvidia stock going to $1,500? appeared first on The Motley Fool Australia.

More reading

• Which ASX stock I’d rather buy than Nvidia at $1,148 per share
• Nvidia stock: 4 reasons to buy, 4 reasons to sell
• ‘Significant potential’: One unexpected ASX 200 AI share to buy now
• 1 ASX growth stock that turned $10,000 into $21,000 in less than 2 years
• Prediction: Nvidia stock will continue to rise…and here’s why

Danny Vena has positions in Nvidia. Bank of America is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bank of America and Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The BHP Group Ltd (ASX: BHP) share price is taking a tumble today.

Shares in the S&P/ASX 200 Index (ASX: XJO) mining giant closed down 1.2% yesterday at $44.28. At the time of writing on Wednesday morning, shares are swapping hands for $43.71 apiece, down 1.3%.

For some context the ASX 200 is up 0.2% at this same time.

It’s not just the BHP share price underperforming today.

Shares in rival ASX 200 iron ore miner Fortescue Metals Group Ltd (ASX: FMG) are down 0.8%, while the Rio Tinto Ltd (ASX: RIO) share price is down 1.3%.

Here’s what’s happening.

What’s pressuring the BHP share price?

BHP’s share price moves on the ASX today are following a similar sell-down in the miner’s international listings.

Overnight, BHP shares closed down 2.2% in the United States, where the company is listed on the New York Stock Exchange (NYSE).

Most of the selling pressure looks to be coming from a sizeable retrace in metals prices.

The copper price dropped another 2.0% overnight to US$9,945 per tonne. While that’s still near historic highs, the copper price has now retraced by almost 9% since 20 May.

Copper counts as BHP’s second biggest revenue earner after iron ore.

Speaking of, the iron ore price tumbled 2.1% overnight to US$107.65 per tonne.

On 7 May the critical steel making metal was fetching just under US$120 per tonne, having fallen from US$143 per tonne in early January.

What’s happening with the iron ore price?

The iron ore price gained for most of April and into early May amid hopes that China’s renewed stimulus efforts would boost the nation’s floundering property sector, providing some helpful tailwinds for the BHP share price.

(Although BHP’s bid to acquire global miner Anglo American (LSE: AAL) weighed on shares late in April.)

But those hopes appear to be fading in recent weeks, as analysts are increasingly sceptical that the measures will be enough to revamp China’s steel-hungry property markets.

According to Daniel Hynes, senior commodity strategist at ANZ Group Holdings Ltd (ASX: ANZ) (quoted by The Australian Financial Review):

Recent property support measures in China failed to ignite much hope of stronger demand. Further [iron ore] price gains will likely be capped by persistent concerns over the state of the Chinese property market.

Robert Rennie, head of commodity and carbon strategy at Westpac Banking Corp (ASX: WBC), also believes iron ore prices are unlikely to top US$120 per tonne again anytime soon, noting that iron ore inventories are rising in China at a time they’d usually be falling.

“It feels as if it’s just a matter of time before we start to see a more meaningful correction below $US110 and eventually $US100, brought on by rising supply out of Africa,” Rennie said.

With today’s intraday moves factored in, the BHP share price is down 13% in 2024.

The post Why is the BHP share price tumbling on Wednesday? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• The BHP share price crushed the benchmark in May. Here’s how
• Here’s the average wealth of Aussies who manage their own superannuation
• Copper checkers: What’s next for BHP shares after Anglo talks?
• Brokers name 3 ASX shares to buy now

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Treasury Wine Estates Ltd (ASX: TWE) share price is racing higher this morning.

At the time of writing, the wine giant’s shares are up 5% to $11.97.

Why is the Treasury Wine share price jumping?

Investors have been buying the company’s shares this morning in response to the release of an update after the market close on Tuesday.

Overnight, the company held an investor and analyst event from its recently acquired DAOU Vineyards property in Paso Robles, United States.

At the event, management spoke positively about Treasury Wine’s opportunity in North America. It also provided an update on its guidance for FY 2024.

In respect to the former, the company believes its DAOU acquisition has unlocked a significant long term growth opportunity for Treasury Americas.

It notes that it has created the number one luxury wine business in the US and filled a significant Treasury Americas portfolio gap at the US$20 to US$40 per bottle range. It has also complemented its existing luxury portfolio above the US$40 per bottle price tag.

Other positives that management highlighted are the significant value creation opportunity leveraging Treasury Americas and DAOU’s unique strengths. It has also provided the scale to consider the creation of a standalone Treasury Americas Luxury division alongside Penfolds.

FY 2024 guidance update

Also boosting the Treasury Wine share price on Wednesday was management reaffirming its guidance for FY 2024.

At a group level, it continues to expect mid-high single digit EBITS growth for the year. This excludes the EBITS contribution from DAOU in the second half.

For Treasury Americas, it expects FY 2024 EBITS in the range of $223 million to $228 million. This reflects luxury portfolio growth, supported by increased availability, with premium portfolio revenue broadly in line with the prior corresponding period.

DAOU EBITS is expected to be approximately US$24 million, which is in line with expectations.

Outlook

Looking ahead, management’s expectations for DAOU are unchanged. The acquisition is expected to be earnings per share accretive (pre-synergies) and mid to high single-digit earnings per share accretive for the first full year of ownership. Over the medium term, average annual low double-digit NSR growth is expected.

Finally, work to assess the future operating model for the company’s global portfolio of Premium brands is continuing. An update will be provided in August.

The Treasury Wine share price is up 6% over the last 12 months.

The post Treasury Wine share price jumps on US opportunity and FY24 guidance update appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• 4 high-quality ASX 200 growth shares to buy in June
• Here’s how the ASX 200 market sectors stacked up last week
• Here are the top 10 ASX 200 shares today
• 4 super ASX 200 blue chip shares to buy

Motley Fool contributor James Mickleboro has positions in Treasury Wine Estates. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Treasury Wine Estates. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Xero Ltd (ASX: XRO) share price is paused from trade on Wednesday morning.

Why is the Xero share price paused?

The company’s shares are paused at present after Xero announced a major convertible notes offering.

According to the release, Xero has launched an offering of US$850 million (~A$1.3 billion) fixed coupon guaranteed senior unsecured convertible notes due in 2031. These are to be issued by its wholly owned subsidiary, Xero Investments, and guaranteed by Xero.

The company intends for the notes to be listed on the official list of the Singapore Exchange Securities Trading. After which, conversion of the notes will be cash settled unless the issuer elects to physically settle the conversion by having Xero issue ordinary shares to the relevant noteholders.

Why is it raising funds?

After deductions for commissions, professional fees, other administrative expenses, and funding the costs of the call option transactions, the net proceeds from the offering will be used for several purposes.

Xero advised that this includes to repurchase its existing notes, for potential acquisitions and strategic investments, and for general corporate purposes.

In respect to the repurchase of existing notes from the US$700 million zero coupon guaranteed convertible notes that are due in 2025, Xero advised that it is carrying out a reverse bookbuilding process. This is being undertaken to receive indications of interest from holders of the existing notes that are willing to sell in return for cash. In addition, Xero may, at its discretion, continue to buyback on-market any remaining existing notes.

As for its potential acquisitions and strategic investments, Xero has not advised of any deals in the works. Instead, it appears to be ensuring that it is positioned to take advantage of opportunities if and when they arise.

Commenting on the convertible notes offering, Xero’s chief financial officer, Kirsty Godfrey-Billy, said:

We’re pleased with how we are managing our strong balance sheet and the optionality this provides. The announced offering will provide us with financial flexibility as we continue to execute our strategic priorities.

The Xero share price is up 20% since this time last year.

Should you buy its shares?

One leading broker that sees a lot of value in the Xero share price is Macquarie.

Earlier this week, its analysts put an outperform rating and $180.70 price target on its shares.

Based on yesterday’s close price, this implies potential upside of 37% for investors over the next 12 months.

The post Xero share price on watch amid $1.3 billion convertible notes offering appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• This ASX index is up 13% in 2024. Is there more up its sleeve?
• 4 high-quality ASX 200 growth shares to buy in June
• Leading brokers name 3 ASX shares to buy today
• Brokers name 3 ASX shares to buy now

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and Xero. The Motley Fool Australia has positions in and has recommended Macquarie Group and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Vanguard MSCI Index International Shares ETF (ASX: VGS) is a popular exchange-traded fund (ETF) that could be a useful investment for many investors, whether they’re already in retirement or just starting out.

The VGS ETF enables investors to gain exposure to the global share market. It invests in businesses from a wide range of major developed countries, including the United States, Japan, the United Kingdom, France, Canada, Switzerland, Germany, the Netherlands, and Denmark.

Could the fund be a better choice for younger or older investors? I think it could be equally appropriate for both groups’ investment strategies for a few key reasons.

Tracks the market for low fees

The global share market has been a powerful wealth-building machine that has delivered pleasing long-term returns, thanks to the strength and economic moats of the underlying holdings.

The VGS ETF portfolio holds many of the world’s leading companies, including Microsoft, Apple, Nvidia, Amazon, Alphabet, Meta Platforms, Visa, Procter & Gamble, Mastercard, Costco, Walmart and Salesforce.

This is a very high-quality group of holdings. It would take an individual investor a great deal of effort and research to recreate a portfolio with that much diversification and quality.

Thanks to this ASX ETF, we can track the performance of the global share market at a low cost.

VGS comes with an annual management fee of just 0.18%, meaning nearly all of the (excellent) returns stay in the hands of investors. Low costs are appealing whether you’re old or young.

Good returns

I wouldn’t advocate investing in something just because it’s diversified. I want to have a satisfactory level of confidence that the investment returns could compound my wealth at a solid pace in the coming years.

According to Vanguard, the VGS ETF has delivered an average return per annum of 12.7% since its inception in November 2014. If the return can continue at a double-digit pace, that’d be good news for anyone’s portfolio, whether they’re beginners or retirees.

We can’t accurately predict future returns, but some of the financial characteristics look compelling enough for continued long-term success. As of April 2024, according to Vanguard, the VGS ETF’s return on equity (ROE) ratio is 18.8%, and the earnings growth rate for the overall portfolio is 14%.

When companies generate good earnings and reinvest money in their businesses for a profit return of almost 20%, I believe this is likely to lead to good long-term outcomes for shareholders.

The younger investors may be looking for an investment to grow their wealth, while older investors may want returns to pay for their lifestyle.

Beginners, retirees, and everyone else could benefit from that potential return and hopefully experience capital growth. However, no level of return can be guaranteed.

What about passive income for retirees?

People in retirement may want more cash flow than this ASX ETF’s dividend yield can provide. According to Vanguard, the VGS ETF dividend yield was just 1.8% at the end of April 2024.

However, if the fund keeps delivering capital growth, retirees could decide to sell a small portion each year and still generate capital growth with their portfolio.

For example, if you invested $100,000 in Vanguard MSCI Index International Shares ETF units and the fund rose 10% in value (potentially including re-investing dividends) in one year, it’d be worth $110,000 after 12 months. You could sell $4,000 of the holding – creating a 4% ‘dividend yield’ on the initial balance – and still have $106,000 remaining.

I wouldn’t want to sell all of the capital gains generated because a share market decline could occur in some years, so it would be wise to consider allowing the balance to keep rising in the positive years.

The post Is the Vanguard MSCI Index International Shares ETF (VGS) a better buy for beginner investors or retirees? appeared first on The Motley Fool Australia.

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• 5 ASX ETFs that could be great long-term buys
• 3 excellent ASX ETFs for beginner investors to buy
• With $1,000 to invest, should I buy ASX growth stocks or income shares?
• How much money should I put in one ASX ETF?

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, Costco Wholesale, Mastercard, Meta Platforms, Microsoft, Nvidia, Salesforce, Visa, and Walmart. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $370 calls on Mastercard, long January 2026 $395 calls on Microsoft, short January 2025 $380 calls on Mastercard, and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Amazon, Apple, Mastercard, Meta Platforms, Microsoft, Nvidia, Salesforce, and Vanguard Msci Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

I think it is fair to say that Lovisa Holdings Ltd (ASX: LOV) shares have taken a real beating this week.

The fashion jewellery retailer’s shares are down over 11% since the end of last week.

This compares to a 0.6% gain by the ASX 200 index over the two trading days.

Why have Lovisa shares been sold off?

Investors have been hitting the sell button this week after Lovisa announced that its CEO, Victor Herrero, will be stepping down from the role next year.

The highly respected CEO will remain with the company until 31 May 2025. After which, he will be replaced by John Cheston, who is currently the CEO of Smiggle, which is owned by Premier Investments Limited (ASX: PMV). Prior to Smiggle, Cheston was CEO at Marks & Spencer.

Given Victor Herrero’s experience in overseeing global expansions for retail brands, investors appear concerned that his exit could derail Lovisa’s own expansion.

Though, it is worth noting that his replacement, John Cheston, has overseen the expansion of Smiggle around the globe. So, he certainly has the experience required to take over the reins at Lovisa.

Broker says buy the dip

Bell Potter has responded to the news and remains positive despite the CEO change. In fact, the broker believes that Cheston will be a good fit for Lovisa. Its analysts commented:

While we see leadership transition risk at LOV with the executive departure, we believe today’s CEO appointment aligns well to drive the next leg of growth and lift the penetration on a global business built by Victor, in addition to the appropriately priced LTIs [long term incentives]. We anticipate a smooth transition over the next 12 months and expect John’s background on Smiggle’s growth strategy into ANZ/UK/Ireland/Asia/Middle East in both retail & wholesale channels to assist continued execution in LOV’s ~40 markets globally.

In light of the above, this morning the broker has retained its buy rating and $36.00 price target on Lovisa’s shares.

Based on its current share price of $29.74, this implies potential upside of 21% for investors over the next 12 months. The broker concludes:

Our Price Target remains unchanged at $36.00/share. We continue to view distinctive growth traits, strong gross margin outlook, store opportunity, ability to execute as a strong player in the fashion jewellery market and lower price point driven competitive advantage as able to justify LOV’s premium to the peer group (~30x FY25e P/E, BPe). Retain BUY.

The post Broker says Lovisa shares are a buy following this week’s selloff appeared first on The Motley Fool Australia.

More reading

• This ASX 200 superstar is down 13% in 2 days. Time to pounce?
• Why Black Cat, Brainchip, Cooper Energy, and Lovisa shares are dropping today
• Why these 4 ASX 200 shares were just rerated by top brokers
• Why Lovisa, Premier Investments, Silver Lake, and WA1 Resources shares are tumbling today
• Why are Lovisa shares sinking 10% on a green day?

Motley Fool contributor James Mickleboro has positions in Lovisa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa. The Motley Fool Australia has recommended Lovisa and Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.